Barth, Hübel, and Scholz (2019)

Barth, Florian, Benjamin Hübel, Hendrik Scholz. "ESG and corporate credit spreads."  Working paper (Friedrich-Alexander-Universität Erlangen-Nürnberg), 2019.

From the authors' abstract: 

"This study examines how credit spreads of European firms are related to their environmental, social, and governance (ESG) performance. Our results indicate that firms with the worst environmental performance exhibit 25 basis points higher credit spreads while the remaining firms share similar CDS spreads… The opposite applies to social performance. Here, 22 basis points higher credit spreads of the most social firms could indicate a waste of valuable resources leading to higher firm risk. In a time-series analysis, we construct ESG factors to assess the time-varying market valuation of ESG. These factors significantly add explanatory power when explaining credit spread changes and thus point to the time-varying market valuation of ESG being a determinant of credit spread changes.”

LK comment: Strong paper.

Link: https://ec.europa.eu/jrc/sites/jrcsh/files/3_1benjamin_hubel_paper.pdf